Fort Smith Officials Say Loan Compromise In The Works

A settlement is in the works between Fort Smith and parties that failed to repay $150,000 in federal funds used 14 years ago to build affordable housing, according to city officials.

In 1998, the Fort Smith Board of Directors approved a federal HOME loan for the nonprofit organization Lend A Hand. The 1 percent loan was to be repaid in 10 years.

In December 1999, Lend A Hand made the first annual interest payment of $1,500; the city has no records that any further interest or principal payments have been made since.

Loan proceeds helped build three homes in the 23-unit Koller Place Addition north of Kelley Highway. A partnership named Barlee Properties II, formed by Lend A Hand and Aaron’s Inc., developed that addition.

“There has been discussion ongoing since the board passed the resolution authorizing litigation,” City Administrator Ray Gosack said. “So, there’s been discussion with Lend A Hand and Barlee Properties about a settlement. We’ll be ready to review that Tuesday with the board.”

Directors are expected to discuss the compromise at Tuesday’s regular board meeting, which begins at 6 p.m. at the Fort Smith Public Schools Service Center, 3205 Jenny Lind Road.

The board had an option to forgive the loan, which would have required the city to repay the HOME loan, or request the U.S. Department of Housing and Urban Development to reduce Fort Smith’s next allocation for HOME loan funding as a form of repayment. Reducing the funding would result in an inability to provide homebuyer assistance for 30 homebuyers during that program year, according to Matt Jennings, the city’s director of community development.

“If that loan is not paid back, there is a possibility that either the city taxpayers would have to pay $150,000 from nonfederal funds, general funds, or there would be a reduction in the amount of HOME funds we would take in a future year,” he said.

Gosack said details of the settlement are still in the works.

“But it’s still a settlement,” he said. “It’s a compromise. It would avoid the possibility of HUD coming back to the city wanting $150,000. Part of the settlement would take care of the obligations to HUD, and would avoid the risk of the city having to repay HUD or take a reduced allocation in future years.”